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Why Health Insurance Exchanges Unnerve CFOs

Karen Minich-Pourshadi, for HealthLeaders Media, October 1, 2012

With health insurance exchanges mandated to launch in 2014, the government has awarded its next round of Affordable Insurance Exchange Establishment grants in an effort to get these programs up and running on schedule. The money is intended to give states the flexibility and resources to create new health insurance marketplaces.

But healthcare CFOs remain wary of the potential financial ramifications of these state-run commercial payer plans, with some calling it "scary" or a "game-changer."

Many industry experts believe organizations that face greater uncompensated care stand to fare better with health insurance exchanges (HIX), as the uninsured will now have some coverage. However, for those healthcare organizations with few uninsured and small Medicare and Medicaid populations and greater amounts of commercial insurance, exchanges stand to hurt the bottom line.

"For us, we have very little Medicaid, very little uninsured, and we have 40% commercial insurance, which is going to now get paid at Medicare or Medicaid rates," says Mary Ann Freas, CFO at Southwest General Health Center, a private, nonprofit, 354-bed hospital located in Middleburg Heights, Ohio. Freas was one of several CFOs who spoke about insurance exchanges while attending the HealthLeaders Media CFO Exchange, an invitation-only event held in September at Kiawah Island, SC.

"We've worked so hard to get our payment rates up to a par with some of the other larger organizations that have a lot of market power in Cleveland, and now [those healthcare organizations] are saying they're going to create our own exchanges. We could be looking at huge reductions in reimbursements from exchanges, and that's what's scary," she says.

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3 comments on "Why Health Insurance Exchanges Unnerve CFOs"


joe davis (10/2/2012 at 7:46 PM)
Sorry, I misquoted a number in an earlier post that has not yet been posted. CBO did assume that 6 million people would enroll in the HIX by 2019 who previously had insurance. This is 6 million out of 24 million expected enrollees. 3,5 of the 6 would be the result of employer "dumping." 1.5 would have employer insurance but would meet the income limits to make them eligible. And, another 1 million would drop their non- group coverage. In any event, while some few analysts are throwing out very high estimates of likely employer dumping into the HIX or just termination of coverage, (which has been a slow but steady trend) there is no good evidence or a clear logic to the alarm. Did not happen in Massachusetts. Pretty hypothetical fear.

Joe Davis (10/2/2012 at 2:46 PM)
With all respect to the CFOs and experts quoted, one of whom is a friend, where is the evidence? Massachusetts did not experience a high rate of employer dumping. The CBO original estimates were higher and assumed that half of all currently insured people would come from employers who dropped coverage. But, that is about six of twelve million people. 30% of ALL CURRENTLY insured employers. I don't think so. And the industry is absolutely scared about being paid less in the future. From everyone. There may be a few states that create an environment for restricted price negotiation...but they will be the BIG exception. It's all about negotiation. That is why the idea of narrow networks and tiered networks are resurfacing. And homegrown ACOs will feed into this, Fewer credible observers expect HIX to lead to Medicare or medicaid rates unless the provider is in that range already with commercial insurers. When you run the numbers, many systems are clearly better off in relation to HIX. And, there will be some interesting opportunities. But, the fog of uncertainty about the future has to create fear.

Drew Joyce (10/2/2012 at 10:15 AM)
Have I missed a development? Why would CFO's believe that individual insurance sold through the exchange will be contracted at Medicaid or Medicare rates? I think everyone expects difficult reimbursement discussions but wouldn't such a major step require more legislative action? There will be more care reimbursed at Medicaid rates in States that opt in, but there should also be a great increase in commercial reimbursement due to expanded enrollment in subsidized individual coverage.